IRAS e-Tax Guide
Change to Assess the Income of a
Husband and Wife as Separate Individuals
Published by
Inland Revenue Authority of Singapore
Published on 26 May 2014
Disclaimers: IRAS shall not be responsible or held accountable in any way for any damage, loss
or expense whatsoever, arising directly or indirectly from any inaccuracy or incompleteness in
the Contents of this e-Tax Guide, or errors or omissions in the transmission of the Contents.
IRAS shall not be responsible or held accountable in any way for any decision made or action
taken by you or any third party in reliance upon the Contents in this e-Tax Guide. This
information aims to provide a better general understanding of taxpayers’ tax obligations and is
not intended to comprehensively address all possible tax issues that may arise. While every
effort has been made to ensure that this information is consistent with existing law and practice,
should there be any changes, IRAS reserves the right to vary our position accordingly.
© Inland Revenue Authority of Singapore
All rights reserved. No part of this publication may be reproduced or transmitted in any form or
by any means, including photocopying and recording without the written permission of the
copyright holder, application for which should be addressed to the publisher. Such written
permission must also be obtained before any part of this publication is stored in a retrieval
system of any nature.
Table of Contents
Page
1
Aim ............................................................................................................ 1
2
At a Glance ............................................................................................... 1
3
Background.............................................................................................. 2
4
Spousal Transfer Scheme....................................................................... 3
5
Tax Change with effect from YA 2016 .................................................... 4
6
Administrative Procedure for Spousal Transfers of Qualifying
Deductions and Rental Deficits that arise in and before YA 2015....... 5
7
Contact Information ................................................................................ 5
8
Updates and Amendments ..................................................................... 6
Annex A – Order of Offset for Spousal Transfer Scheme .......................... 7
Annex B – Transitional Arrangement for the Removal of Spousal
Transfer Scheme ....................................................................... 10
Change to Assess the Income of a Husband and Wife as
Separate Individuals
1
Aim
1.1
This e-Tax guide clarifies the tax change in relation to the assessment
of a married couple’s income. It replaces the earlier e-Tax guide on the
same topic which was first published on 22 Jun 2004.
2
At a Glance
2.1
Separate assessment as a default mode of assessment for husband
and wife was introduced in Year of Assessment (“YA”) 2005 to replace
the previous combined assessment for married couples.
2.2
With the removal of combined assessment, married couples are
allowed to transfer the excess qualifying deductions1 and rental deficit
between themselves (“spousal transfer”) from YA 2005 to YA 2015.
2.3
With effect from YA 2016, the spousal transfer scheme would be
phased out. Any qualifying deductions and rental deficits arising from
YA 2016 (basis year 2015) onwards would no longer enjoy spousal
transfer. As a transitional concession, qualifying deductions arising in
and before YA 2015 would be allowed for offset against the income of
the taxpayer’s spouse until YA 2017, subject to existing spousal
transfer rules.
1
Please refer to paragraph 4.1 for the definition.
1
3
Background
3.1
Prior to YA 2005, the income of a married woman was deemed to be
chargeable under her husband’s name unless she elected for separate
assessment. Election was done on a yearly basis when the income tax
return was being filed each year.
3.2
Where a married woman did not elect for separate assessment, her
income was assessed together with her husband’s income (“combined
assessment”). Wife relief of $2,000 was given to a married man for
each YA if his wife had no income chargeable in her own name. If his
wife had income, the amount of wife relief given to him would be the
difference between $2,000 and the amount of income chargeable in
the wife’s own name.
3.3
This tax treatment was reviewed and separate assessment as a default
mode of assessment for married couples was introduced in YA 2005
for the following reasons:
(a) The social context in Singapore had changed over the years. More
married women were working and dual income families were also
becoming the norm.
(b) It was generally less advantageous for spouses to be taxed in the
form of combined assessments, as the combined income would
generally attract a higher marginal tax rate. The tax change
simplifies the tax filing process for married couples whereby the
married women need not elect for separate assessment yearly.
3.4
With the change, a married man would be allowed to claim for the full
amount of wife relief of $2,000 so long as his wife’s income was not
more than $4,000 (the income threshold was $2,000 prior to YA 2010)
in the preceding year for that YA. The wife relief was expanded to
spouse relief with effect from YA 2010 to allow female taxpayers to
claim relief for supporting their husbands.
2
4
Spousal Transfer Scheme
4.1
With the removal of combined assessment, spousal transfer scheme
was introduced in YA 2005 to ensure that married couples would not
be made worse off, tax wise. A married couple would be allowed to
transfer the excess of qualifying deductions between each other if there
is any remaining qualifying deduction that cannot be completely offset
against the income of the respective spouse for a particular YA.
Qualifying deductions refer to:
(A)
Any allowance falling to be made under section 16, 17, 18B,
18C, 19, 19A, 19C, 19D or 20 of the Income Tax Act (“capital
allowances”);
(B)
Any loss incurred by the individual in any trade, business,
profession or vocation which, if it had been a profit, would have
been assessable under the Income Tax Act (“trade loss”); and
(C) Any donation made by the individual under section 37 (3) (b), (c),
(e) or (f) or 6) of the Income Tax Act (“donations”).
4.2
Under the scheme, any qualifying deductions should first be offset
against the assessable income of the taxpayer whose activities gave
rise to the deductions. Any excess can then be transferred to the
spouse in the order of capital allowance, trade loss followed by
donations.
4.3
The transferee must have assessable income available before the
transfer can be allowed. The amount available for transfer is restricted
to the assessable income of the transferee.
4.4
As an administrative concession, where both spouses have rental
income, they would be allowed to transfer rental deficit to each other.
The amount of transfer should strictly be limited up to the net amount
of the available rental income of the transferee. Rental deficit of the
transferor can only be transferred if the transferee has positive rental
income. No amount of rental deficit transferred can be offset against
any other income of the transferee.
3
5
Tax Change with effect from YA 2016
5.1
To simplify our individual income tax system, it was announced in
Budget Statement 2014 that the spousal transfer scheme would be
phased out from YA 2016 onwards. Any qualifying deductions and
rental deficits arising from YA 2016 (basis year 2015) onwards would
no longer enjoy spousal transfer.
5.2
As a transitional concession, qualifying deductions arising in and before
YA 2015 by a taxpayer will be allowed for offset against the income of
his or her spouse until YA 2017, subject to existing spousal transfer
rules 2. The transitional arrangement for spousal transfer is summarised
as follows:
YA in which
the deductions
arose
2014
2015
2016
Unabsorbed capital
allowances, trade losses and
donations
YA of spousal transfer
2015 - 2017
√
√
×
2018 onwards
×
×
×
Unabsorbed
capital allowances
and trade losses
Carry-back 3 to
preceding YA
√
√
×
“ √ ” denotes spousal transfer allowed under transitional concession
“ × ” denotes spousal transfer not allowed
5.3.
Taxpayers will generally not be disadvantaged by the removal of the
transfer between spouses as alternative measures of carry-forward
remain available. Any unabsorbed capital allowances or losses can be
carried forward to offset against a taxpayer’s income in subsequent
years, until the allowance or losses are fully utilized, subject to certain
conditions4. A taxpayer can also carry forward unutilized donations to
subsequent YAs up to a maximum of 5 years.
2
Under existing rules, rental deficits cannot be carried forward to future YAs. Therefore, the
transitional concession would not apply to rental deficits.
3
For more details of carry-back relief system, please refer to e-Tax Guide “Carry-Back Relief
System” published on 26 May 2014.
4
The carry-forward of unabsorbed capital allowances is subject to the same business test
(i.e. the same trade or business is continued). In the case of limited partner of a Limited
Liability Partnership or Limited Partnership, the deduction of unabsorbed losses and capital
allowances against other sources of income is subject to the relevant deduction restriction.
4
5.4
For more details, please refer to:
(a) Annex A for the illustration of the order of offset under the spousal
transfer scheme.
(b) Annex B for the worked example which illustrates the transitional
arrangement from YA 2015 to YA 2017.
6
Administrative Procedure for Spousal Transfers of Qualifying
Deductions and Rental Deficits that arise in and before YA 2015
6.1
a. Procedure to Elect for Spousal Transfer
i. For the transfer to take place, an election must be made by both
spouses on a yearly basis.
ii. The election must be made within 30 days from the date of Notice
of Assessment of the taxpayer or the spouse 5, whichever is the
later. The election6 once made is irrevocable.
b. Revisions to Assessments
i. Upon election, Comptroller of Income Tax will re-compute the
assessment of the transferor and transferee to take into account
the respective transfers. Any subsequent revision to either party’s
tax assessment will result in a corresponding revision to the
spouse’s tax assessment.
7
Contact Information
7.1
For any enquiries or clarification on this e-Tax Guide, please call 1800356 8300.
5
This excludes default and estimated assessments.
6
Taxpayers can download the election form from the IRAS website and submit the completed
form to IRAS.
5
8
Updates and Amendments
Date of
amendment
1
26 May 2014
Amendments made
The following paragraphs with regard to the removal
of
spousal
transfer
scheme
have
been
added/amended:

Added Paragraph 5 on the details of removal of
the scheme and the transitional arrangement;
and

Amended Annex A and added Annex B on the
illustration of the transitional arrangement.
6
Annex A - Order of Offset for Spousal Transfer Scheme
The following example illustrates the:


Order of offset under spousal transfer scheme for qualifying deductions and rental deficits that arisein and before YA2015; and
Treatment of qualifying deductions and rental deficits that arise from YA 2016 onwards
Assume the following information is extracted from the husband’s and wife’s tax returns respectively for YA 2015 and YA 2016.
YA2015
YA2015
Husband
Trade:
Employment:
$
Adjusted Profit
4,500
Unabsorbed Loss b/f YA 2014
(53,390)
Unabsorbed Capital Allowances b/f YA 2014
(22,000)
Salary
12,000
Bonus
3,000
Net Rent:
(4,110)
Donations:
Adjusted Profit
25,000
Employment:
Salary
22,000
Bonus
2,000
Director's Fees
2,000
Net Rent:
10,000
YA2016
Husband
Net Rent:
Donations:
$
Trade:
400
YA2016
Trade:
Wife
$
Adjusted Loss
(14,500)
(3,000)
500
Wife
Trade:
Net Rent:
Adjusted Profit
35,000
12,000
7
Annex A (continued)
Worked example of the tax assessments for YA2015 and YA2016 using the above information extracted from their tax returns.
YA2015
YA2015
Husband's Assessment (Transferor)
Trade:
Employment:
Adjusted Profit
Less: Unabsorbed Capital
Allowances b/f
Salary
Bonus
Wife's Assessment (Transferee)
$
4,500
$
(22,000)
(17,500)
12,000
3,000
Trade:
Unabsorbed Capital Allowances c/f
Less: Unabsorbed Capital Allowances c/f Transferred
to Spouse
Unabsorbed capital allowances c/f
Unabsorbed Loss b/f
Less: Unabsorbed Loss Transferred to Spouse
Unabsorbed Loss c/f
Current Year Donations (2.5 Times Deduction) 7
Less: Current Year Donations Transferred to Spouse
Current Year Donations c/f
Assessable Income
7
(4,110)
4,110
$
(2,500)
22,500
(53,390)
(30,890)
15,000
Employment:
Net Rent
Less: Rental Deficit Transferred to Spouse
Adjusted Profit
Less: Unabsorbed Capital Allowances
Transferred in from Spouse
Less: Unabsorbed Loss
Transferred in from Spouse
$
25,000
0
Salary
Bonus
Director's Fees
22,000
2,000
2,000
26,000
Net Rent
Less: Rental Deficit Transferred in from Spouse
10,000
(4,110)
5,890
(2,500)
2,500
0
(53,390)
53,390
0
(1,000)
1,000
0
0
Statutory Income
Less: Donations Transferred in from Spouse
Assessable Income
1,000
(1,000)
0
Announced in Budget 2011 that tax deduction of 2.5 times will be applicable for donations made from 1 January 2011 to 31 December 2015.
8
Annex A (continued)
YA2016
YA2016
Husband's Assessment
Trade:
Wife's Assessment
Adjusted Loss
$
(14,500)
Unabsorbed Loss c/f
Net Rent
Unabsorbed loss c/f
Current Year Donations c/f (2.5 Times Deduction)
Assessable Income
$
(14,500)
(3,000)*
$
Trade:
0
Adjusted Profit
$
35,000
Net Rent:
12,000
Assessable Income
47,000
(14,500)*
(1,250)*
0
Note: * Qualifying deductions and rental deficits that arise from YA2016 onwards will not enjoy spousal transfer.
End of Annex A
9
Annex B – Transitional Arrangement for the Removal of Spousal Transfer Scheme
The following example illustrates the transitional arrangement, where the qualifying deductions:


Arising in and before YA2015 will continue to enjoy spousal transfer up till YA2017; and
Arising from YA 2016 onwards will not enjoy spousal transfer.
Assume the following information is extracted from the husband’s and wife’s tax returns respectively from YA2015 to YA2018.
YA2015
Husband
Trade:
Employment:
$
Adjusted Loss
(200,900)
Salary
Bonus
13,000
2,000
YA2015
Wife
Trade:
Employment:
$
Adjusted Profit
21,300
Salary
Bonus
Director's Fees
20,000
3,050
2,000
Net Rent:
Donations
(5,000)
16,000
Net Rent:
YA2016
Husband
Trade:
Adjusted Loss
$
(23,350)
YA2016
Wife
Trade:
Adjusted Profit
$
30,550
Adjusted Profit
$
16,000
YA2017
Wife
Trade:
Adjusted Profit
$
124,950
Adjusted Profit
$
24,600
YA2018
Wife
Trade:
Adjusted Profit
$
105,600
YA2017
Husband
Trade:
YA2018
Husband
Trade:
7,550
10
Annex B (continued)
Worked example of the tax assessments from YA2015 to YA2018 using the above information extracted from their tax returns.
YA2015
YA2015
Husband's Assessment (Transferor)
Wife's Assessment (Transferee)
$
Trade:
Adjusted Loss
Employment:
Salary
Bonus
Net Rent
Less: Rental Deficit Transferred to Spouse
13,000
2,000
(5,000)
5,000**
$
(200,900)
15,000
$
Trade:
Employment:
Adjusted Profit
Less: Unabsorbed Loss
Transferred in from Spouse
Salary
Bonus
Director's Fees
Less: Unabsorbed Current Year Loss
Transferred to Spouse
Unabsorbed Loss c/f
Current Year Donations c/f (2.5 Times Deduction)
Statutory Income
Assessable Income
(48,900)
20,000
3,050
2,000
25,050
0
Net Rent
Unabsorbed Current Year Loss c/f
$
21,300
(185,900)
7,550
Less: Rental Deficit
Transferred in from Spouse
(5,000)
2,550
48,900
(137,000)
(40,000)
0
0
Statutory Income
Assessable Income
0
0
** Under the admin concession, rental deficit arising in and before YA 2015 can only be transferred if the transferee has positive rental income.
11
Annex B (continued)
YA2016
Husband's Assessment (Transferor)
Trade:
Adjusted Loss
Add: Unabsorbed Loss b/f YA2015
YA2016
Wife's Assessment (Transferee)
$
(23,350)
(137,000)
Total Unabsorbed Loss
$
Trade:
(129,800)
Unabsorbed Loss c/f (YA 2015)
Unabsorbed Loss c/f (YA 2016)
(106,450)
(23,350)
Total Unabsorbed Donations c/f (YA2015)
Assessable Income
(40,000)
0
YA2017
Husband's Assessment (Transferor)
$
(30,550)
0
Assessable Income
0
YA2017
Wife's Assessment (Transferee)
$
16,000
Adjusted Profit
Less: Unabsorbed Loss b/f
$
30,550
30,550
Total Unabsorbed Loss c/f
Trade:
Less: Unabsorbed Loss (YA2015)
Transferred in from Spouse
(160,350)
Less: Unabsorbed Loss (YA2015) Transferred
to Spouse
Adjusted Profit
$
Trade:
(129,800)
Total Unabsorbed Loss
Less: Unabsorbed Loss (YA2015) Transferred to Spouse ^
Unabsorbed Loss c/f (YA 2016)
Total Unabsorbed Donations b/f (YA2015)
Less: Unabsorbed Donations (YA2015) Transferred to Spouse
Unabsorbed Donations c/f (YA 2015)
Statutory Income
Assessable Income
Adjusted Profit
Less: Unabsorbed Loss (YA2015)
Transferred in from Spouse
$
124,950
$
(90,450)
34,500
(113,800)
90,450
(23,350)
40,000
(34,500)
(5,500)
0
0
Statutory Income
Less: Donations Transferred in from Spouse
Assessable Income
34,500
(34,500)
0
Note: ^ Amount transferred is limited to the unabsorbed losses incurred up till YA2015. Qualifying deductions that arise from YA2016 onwards will not enjoy spousal transfer.
12
YA2018
YA2018
Husband's Assessment (Transferor)
Trade:
Adjusted Profit
Less: Unabsorbed Loss b/f (YA 2016)
Wife's Assessment (Transferee)
$
24,600
(23,350)
$
Adjusted Profit
$
105,600
1,250
Unabsorbed Donations b/f (YA 2015)^^
(5,500)
Unabsorbed Donations c/f (YA 2015)
(4,250)
Assessable Income
$
Trade:
Statutory Income
105,600
Assessable Income
105,600
0
Note:
^^ Qualifying deductions that arise in and before YA2015 will continue to enjoy spousal transfer up till YA2017 only. Hence, the husband’s unabsorbed donations – although
carried forward from YA2015 – will not be allowed to be transferred to his wife even though she has positive assessable income in YA2018.
End of Annex B
13